MANAGERS READY FUNDS OF FUNDS AND MANAGED FUNDS products AS FSA ALTERS LEGISLATION
Groups with funds of funds or managed funds will be able to convert their products to Oeics following the adoption of Oeics2 legislation, which takes effect from the end of the month.
N2, the date at which the FSA obtains its powers as defined under the Financial Services and Markets Act, will enable the FSA to alter existing Oeic legislation to allow for funds of funds and money market portfolios.
Under existing legislation, funds of funds and cash funds can only be held in unit trusts.
Among the groups that have decided to convert are Premier Asset Management, Edinburgh Fund Managers, M&G, Hendersons and Axa Investment Managers.
Other managers looking to convert are Credit Suisse Asset Management and Rothschild Asset Management, both of which see benefits to investors and themselves, particularly in terms of wider European marketing possibilities and administration efficiencies.
Premier has already applied to the FSA to have its two fund of funds structures, Premier Selector Growth and Premier Selector Income, converted to Oeics from 1 December.
M&G applied to change most of its range earlier this month and will include its managed products in the third wave of this conversion process. Hendersons, one of the biggest retail fund of funds managers in the UK, will convert its multi-manager range.
This could include the introduction of the first no-load share class in the retail multi-manager market. Hendersons' X-share, which is available on a number of its funds, carries no front-end fee but has a sliding scale of exit charges.
There are some dissenters on the introduction of the new legislation, including two of the largest groups in the UK retail market, Jupiter and Fidelity.
Jupiter has said it is reviewing the situation but wants to see what the legislation will actually look like before making a firm decision to Oeic its entire range, including its fund of funds.
The group said it also wants to look at Oeics2 in conjunction with the FSA's moves on single pricing as the only difference between the two vehicles would be the ability to sell into Europe.
Fidelity, one of the first groups in the UK to convert to Oeics, and Threadneedle said they have no immediate plans to alter their managed portfolios or money market funds until after European legislation has caught up with the UK.
Mary Blair, product development director at Threadneedle, says: 'The thing that is interesting with funds of funds in Oeics is Europe, where they are very popular vehicles so we'd prefer to wait until Ucits2 is implemented.'
While the UK industry can convert these types of portfolios to an Oeic structure, it will be almost another year before groups can sell these products into Europe, following a lag in European legislation.
The Ucits2 directive, which covers the passporting of funds across borders, is expected to be adopted by European Finance Ministers on 4 December. The UK will then have 18 months in which to accept the directive as national law before investment houses can sell funds of funds cross-border into Europe.
Oeics2 and Ucits2 are not interdependent. However, for selling opportunities, groups will want the FSA to move quickly on adopting the Ucits directive.
Sheila Nicol, deputy director general at Autif, said the association will encourage the FSA to separate the Ucits2 directive by the underlying two proposals.
Proposal one, which allows for passporting and a simplified prospectus to replace UK key features documents, is less controversial, Nicol said, noting proposal two of the directive includes capital adequacy rules, which have caused some debate at the European level.
With a very optimistic outlook, Nicol said the association would like to see the FSA pass proposal one by mid-2002, although it is more likely to be close to autumn next year.
The adoption of proposal one of Ucits will also enable investment houses to develop new products such as mixed funds, vehicles which holds a combination of other collectives and equities.
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